Noncash consideration - transaction price

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Under US GAAP, if a services company that would otherwise request a client to pay an upfront fee for a portion of the charges relating to these future services instead asks its customer to provide it with a promissory note that would unconditionally be payable (in lieu of upfront payment), how would this be accounted for. The question here pertains to the ASC 606 transaction price for revenue recognition purposes specifically, would this be the present value of that promissory note as it would be considered a noncash consideration exchanged (i.e. a financial instrument, so a financial commitment instead of cash) that should be measured at its fair value?
 

kirby

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One question: When is the due date of the promissory note? When is it to be paid?
 
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thanks for your response, the promissory note is payable over a term that is generally between 3 to 4 years with fixed payment due dates. I should note, payment is not conditional upon delivery of the services.
 

kirby

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So yes, you would use the present value of the note. Initial recording would be DR Promissory Note Asset Account CR Unearned Revenue Liability Account. Just note that this method, versus receiving upfront cash, will obviously negatively affect your cash flow.
 
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Thanks Kirby! The note would actually be sold on a true sales basis to a 3rd party investor, so cash would still be collected upfront
 

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